<img height="1" width="1" style="display:none;" alt="" src="https://dc.ads.linkedin.com/collect/?pid=699036&amp;fmt=gif">
Sears and the Wholesale Collapse of Legacy Retail

Sears and the Wholesale Collapse of Legacy Retail

A recent Business Insider piece provided grisly details of the “death spiral” at Sears, the legacy retail chain that has devolved from iconic to irrelevant. The story came on the heels of an announced 150 store closings, including 108 Kmarts. (That gives you a hint of the problem right there — although it was Kmart that acquired Sears in 2004, the new corporation took the name Sears Holdings.)

The reasons for Sears’ decline are obvious. Today’s consumers would rather shop online using their devices than visit a store in person.

The only problem with that obvious conclusion is that it’s wrong.

Numbers Never Lie (But They Can Sure Mislead You)
It’s an understandable mistake. Combine the precipitous decline of Sears and other suburban mall stalwarts like The Limited with Amazon’s ubiquity and it’s easy to conclude that the war is over and e-commerce has won. But the numbers don’t support that. According to the most recent figures available, U.S. e-commerce accounts for just 8.4% of retail sales. That means American shoppers still spend more than nine out of every 10 dollars in a physical space.

The real problem for Sears and other legacy brands isn’t that retail is migrating online. It’s that it’s migrating to a different kind of in-store experience. And it’s unfathomable to me that so many legacy retailers have failed to recognize this.

Eddie Lampert, the former Wall Street investor, faced a steep climb when he appointed himself CEO at Sears Holdings four years ago. Sears hasn’t been an envelope-pusher since the heyday of the Sears catalog. Their stores are empty. They feel dated. Compounding the problem, Sears can’t attract and retain higher-quality employees on the front end to deal with the consumers. (Granted, this problem isn’t unique to legacy retail. Fast-food franchises and supermarket chains — even the successful ones — face the same challenge.)

So you have low morale and high turnover, and it becomes a vicious cycle. If you were a young person with a lot of energy and vitality, would you rather work at Sears or Colette? (If you haven’t experienced Colette in Paris, you must.) Kmart or lululemon?

Retail Is Alive and Well — When It’s Done Right
The lululemon formula for success — premium prices for quality products associated with a specific lifestyle — demonstrates that bricks-and-mortar retail is alive and well.

Another element of lululemon’s success has been moderation. There are only about 300 lululemon stores worldwide. Ikea, the quirky Swedish home-furnishings chain, is thriving in part due to similar restraint. While it’s set to open its largest American store yet in Burbank, Ikea has only about 40 locations nationwide. (Kmart, by comparison, had 1,300 U.S. stores at its peak.)

Same story with Apple Store: There are only about 490 Apple Stores worldwide, spread across 20 countries. And by the way, I can’t think of a better rebuttal to the “digital is killing retail” argument than the success of Apple Store. Apple, one of the pioneers of the digital world, was in its death throes, and it survived by reinventing itself and going into retail. And now Amazon is opening bricks-and-mortar stores, too. Something I’ve been recommending since they could have bought Borders in bankruptcy years ago.

The Sears Catalog of Catastrophic Blunders
So to look at the death spiral of Sears and conclude that e-commerce is the culprit is a lazy analysis. Just as it was lazy to say that Netflix killed Blockbuster.

No. What killed Blockbuster was that it became incredibly bloated. Too many locations, too much product. For years, that was the driving force behind public companies: It was about total revenue and driving revenue margin as opposed to average single store revenue.

“Traditional big-box retailers have been hit hard by the rise of online shopping and falling foot traffic in shopping malls,” Business Insider wrote. “But current and former workers say Sears’ problems have more to do with Lampert’s management and strategies than the larger industry changes.”

Exactly. Eddie Lampert is precisely the wrong guy at the wrong time for Sears Holdings. He’s a financial guy with no branding experience, trying to fix an aging, bloated retail chain that has lost its identity. (CBS.com ran a piece challenging people to name the taglines at Kmart or Sears — and that was seven years ago.) Worse, consumers have written off the identity of those brands.

What could possibly go wrong?

Sears Holdings’ one attempt at building a “consumer experience,” the Shop Your Way rewards program, is so user-unfriendly that it lends itself to parody. Maybe that’s because the real reason for the rewards program was not to reward the consumer but to mine their personal data and sell it to other companies.

Really, when you add up all the mistakes that Sears has has made, it should be in a death spiral. And blaming the company’s demise on the rise of e-commerce is a cop-out.

About Lewis

Lewis GershChairman and Founder at PebblePost, former VC in adtech, long-time endurance athlete, happy dad to “The Heathens.”

Follow: Follow on Twitter Follow on LinkedIn Follow on Medium

Subscribe to Email Updates

Recent Posts